What Are the Headwaters of Formal Savings? Experimental Evidence from Sri Lanka

Michael Callen, University of California San Diego, Suresh de Mel, University of Peradeniya, Craig McIntosh, University of California San Diego, Christopher Woodruff, Oxford University
Posted onMarch 15, 2019

The world’s poor are seeing a rapid expansion in access to formal savings accounts. What is the source of savings when households are connected to a formal account? We combine a high-frequency panel survey spanning two and a half years with an experiment in which a Sri Lankan bank used mobile Point-of-Service (POS) terminals to collect deposits directly from households each week. We find that the headwaters of formal savings lie in sacrificed leisure time: households work more, and improved savings options generate an increase in labor effort in both self-employment and in the wage market. The results suggest that the labor allocation channel is an important mechanism linking savings opportunities to income.